How Human Psychology Explains Exclusive Brands and Exclusionary Policies

For the first experiment, the researchers employed 274 participants who’d just taken part in an unrelated study for which they were paid $15. The participants were told they could bid as much as $15 in an auction for a custom T-shirt created exclusively for the study. Imas and Madarász split the participants into three groups. In one, a certain number were randomly excluded. In another, they were permitted to bid only if they signaled they wanted the T-shirt. In the third group, anyone could bid.

Average bids were highest in the random-exclusion group, the researchers find, supporting the theory that the perception of exclusivity—that some people who wanted it couldn’t have it—elevated the subjects’ desire for the T-shirt.

In a second experiment involving 95 similar participants, the researchers created two groups. In the first, everyone wrote down how much they’d be willing to pay for the T-shirt, and those who bid more than a certain price were allowed to buy it. In the other group, some participants were randomly excluded, and the remainder wrote down how much they’d be willing to pay. The median bid in the random-exclusion group was $5, twice the median in the first group, the researchers find.

“These results provide direct support for the role of mimetic dominance in private valuations,” they write. “People significantly increase their willingness to pay for a good if they know that there are others whose intrinsic tastes for the good may well be in excess of theirs, but . . . they cannot obtain the good.”

The findings may help explain some situations that vex economists and political scientists, the researchers suggest. For example, the mimetic dominance motive can explain the seemingly puzzling tendency of some companies to artificially restrict supply in the face of surging demand. In these cases, exclusion may be a feature rather than a bug—increasing supply would eliminate the gratification people get from knowing that others want what they have but cannot get it, which would decrease their valuation of the product and eat into profits.

Imas and Madarász also point to research from Princeton’s Ilyana Kuziemko, Harvard’s Ryan W. Buell and Michael I. Norton, and Yale’s Taly Reich that finds some of the fiercest opposition to raising the American minimum wage comes from people earning just over the minimum. The mimetic-dominance finding indicates that this could be because higher pay for those at the bottom would eliminate the advantage that the next-lowest group perceives having, Imas and Madarász write.

“A policy which sustains exclusion and inequality may be more popular than a redistributive policy even for those who would gain materially from greater social insurance because it may lead to a loss of mimetic dominance,” they write. They argue that this idea also applies to policies on immigration, economic nationalism, and barriers to trade.

“Our model helps explain a host of market anomalies and generates novel predictions for competition and political economy,” Imas and Madarász write. “The framework provides a novel motive for attitudes against redistribution and immigration, as well as points to a novel psychological motive for inter-group discrimination.”